Q.2) The global crude oil prices are on downturn due to shale exploration and other geo-political factors. How will it affect rural economy of India?

The Top Answer for this Question is written by – Annapurna Garg

Ans) Crude oil prices have seen an unprecedented fall in prices in recent time driven by various factors such as shale exploration, economic slowness in Europe and China, increase in crude production by Saudi Arabia and recently concluded pact with Iran. It is a major event in global platform which has important ramifications for India rural economy.

Positive impacts:

It has led to easing of inflation. This will lead to increase in purchasing capacity of households and improved household savings.

It has and would further reduce government’s subsidy burden, thus reducing fiscal deficit. This would facilitate greater public investment in rural economy.

Crude oil price fall is due to economic slowness which has led to reduced commodity prices. This has brought doom for Indian farmers. For example rubber farmers of Kerala have suffered massive losses.

Demand for agro exports is lacklustre.

Thus, international events have affected many lives in varied ways. National policy should aim at leveraging the opportunity and minimising the adverse affects.

Q.3) The condition of farm sector and farmers is stubbornly stagnated despite several support measures. What could be the possible reasons for it? Analyze each reason and suggest alternative, if any.

The Top Answer for this Question is written by – Monk Who Sold His Nano

Ans) Despite employing highest share of workforce, agriculture is the slowest growing sector. The following reasons may be cited for stagnation-

Historical –

a) British exploitation of farmers due to cash crops and famines of 60s made government averse to commercial farming and only cereals were targeted under green revolution. Having resolved the hunger problem cereals still remain the priority of our agricultural production

b) Poor implementation of land reforms have led to scattered land holdings, and increasing proportion of small and marginal farmers.

c) The continuing legacy of GR of cheap electricity, diesel and fertilizers have caused ecological problems of land degradation in Punjab, Haryana and Western UP

Decreases savings rate in banks, which is the only source of investment for poor

High Gini coefficient reflects increasing inequality against poor

In this regard , FSLRC recommendations of setting an independent monetary policy committee to determine such rates can be considered . Thus , rate cuts must be driven by balancing the needs of growth , stability and inclusiveness and RBI should act as facilitator for promoting private investments and welfare of poor.

Q.5) Payments banks are the new buzzword in the banking sector. Comment on it’s need, objective and potential.

The Top Answer for this Question is written by – SK

Ans) A major shift in the Indian banking system will be witnessed from large-scale public sector banks to small- scale “Payment Banks” with the RBI granting “in principle” licenses.

Need for Payment Banks – It is becoming economically unviable to provide financial services to the marginalized sections who are scattered in the hinterlands. Physical branches can’t be set up everywhere due to operational costs. Hence Payment Banks are needed.

Objective – To provide low-cost financial services like small savings, payments, and remittances to low income households, migrant labourers and others.

Potential

Payment Banks provide transition from cash-based transaction to cash-less transactions. This can help curb black money.

They operate mainly using mobile phones. This will pave the way for penetration of mobile internet in the future, contributing to Digital India.

They can be useful for direct benefit transfers by integrating with JAM trinity. This would help arrest leakages and thereby achieve fiscal consolidation.